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PayPal Inc. this week demonstrated its slick new person-to-person payments option for Android smart phones equipped with near-field communication (NFC) technology. The demo gave birth to a crop of headlines in online tech publications, but the new service may be little more than a prelude to bigger things PayPal has in store, notably point-of-sale payments.
Laura Chambers, senior director of PayPal Mobile, showed off the technology at the MobileBeat 2011 conference in San Francisco, and The PayPal Blog has a video of it. The service enables two PayPal account holders with Samsung Nexus S phones to transfer money to each other by tapping their phones together. Users access the service through an app downloadable through Google Inc.’s Android Marketplace.
With it, someone who just paid the lunch tab, for example, can ask for reimbursement from her friend. The requester enters a dollar amount, two account holders touch their phones together, and the phones buzz, or vibrate. The sender then sees the recipient’s request on his phone, enters his PIN, and hits send. The recipient receives an e-mail confirmation. The service accesses funds in the senders’ PayPal account and does not change the existing funding process.
PayPal said the new feature would be available later this summer. The Samsung Nexus S currently is the only NFC smart phone in the U.S. market, though more are expected within the next year.
PayPal already has other P2P options through its conventional online service and through non-NFC smart phone technology that uses Bump Technologies Inc.’s system, which enables smart phone users to transfer data by touching the devices together. Bump at first was available on Apple Inc.’s iPhone but now is an option for Android phones. So why bring NFC into the P2P equation? The older smart phone service has more steps and takes slightly longer, a PayPal spokesperson tells Digital Transactions News. “It’s not inelegant, it’s just not as elegant or slick as this solution,” the spokesperson says. “It’s another easy way to make P2P transactions.”
Still, payment-technology analyst Aaron McPherson of Framingham, Mass.-based IDC Financial Insights is underwhelmed. “I’m not sure what this does that Bump doesn’t do,” he says. “It just seems, ‘so what?’” He also says demand will be limited by the small number of NFC-capable smart phones, even after more devices join the Samsung Nexus S, and what he says research shows is the relatively small demand for electronic P2P payments.
The far bigger opportunity for mobile phones, according to McPherson, is consumer-to-business mobile payments. This bubbling market now includes Google, but PayPal plans to cede no ground. PayPal has said it plans to have a point-of-sale service out by year’s end, though it hasn’t given details. Meanwhile, parent company eBay is buying Zong, a bill-to-carrier payments company that will be placed under PayPal’s wing.
In a recent interview with an Australian broadcaster, PayPal president Scott Thompson said PayPal would have three options at the point of sale, with mobile phones being the only one he identified. The other two options “will be unique,” he said. The PayPal spokesperson declined to comment further. McPherson, however, says the range of technological options is relatively limited, with data-transfer possibilities including 2-D bar codes, e-mail, and text-messaging technology.
